An analysis of the top five forestry and lumber companies shows an estimated annual freight spend of between $5 billion and $7 billion.
2021 saw freight costs go up across the board for all industries. For this group of forestry and lumber companies, its estimated annual transportation costs went up a combined $469 million, or 8.3%, from 2020. The wild ride of lumber prices softened the blow a bit as revenues for the top five spiked 60% compared to a challenging 2020.
Like many industries, 2020 was demanding for forestry and lumber. The COVID-19 pandemic began with lockdowns but once these were lifted, the demand for housing repairs, improvements and new construction soared. So did spot-market prices for lumber, which spiked in May 2020 by 300% and again in the first quarter of 2021 by 250%.
The price of lumber has collapsed again and is trending along its historical range. Interest rates are climbing and the demand for lumber and new construction has stalled.
In this economic environment, forestry and lumber companies are seeking to minimize production and distribution costs as much as possible.
In our analysis, we show that a 1% savings on freight costs can drive material results to a lumber company’s net income. To do this, though, a company must understand not only what drives the freight market but the effects it has on supply, demand and rates in real time.
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